Multiple Product Planning with Taxes In the year 2017, Pyramid Consulting had the following contribution income statement: PYRAMID CONSULTING Contribution Income Statement For the Year 2017 Sales revenue $ 1,300,000 Variable costs Cost of services $ 420,000 Selling and administrative 200,000 (620,000) Contribution margin 680,000 Fixed Costs -selling and administrative (285,000) Before-tax profit 395,000 Income taxes (36%) (142,200) After-tax profit $ 252,800 a) Determine the annual break-even point in sales revenue. Round contribution margin ratio to two decimal places for your calculation. Round final answer to nearest dollar. (b) Determine the annual margin of safety in sales revenue. Use rounded answer from above for calculation. (c) What is the break-even point in sales revenue if management makes a decision that increases fixed costs by $57,000? Use rounded contribution margin ratio (2 decimal places) for your calculation. (d) With the current cost structure, including fixed costs of $285,000, what dollar sales revenue is required to provide an after-tax net income of $200,000? Use rounded contribution margin (2 decimal places) for calculation. Round your answer to the nearest dollar.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Multiple Product Planning with Taxes
In the year 2017, Pyramid Consulting had the following contribution income statement:
| PYRAMID CONSULTING Contribution Income Statement For the Year 2017 |
||
|---|---|---|
| Sales revenue | $ 1,300,000 | |
| Variable costs | ||
| Cost of services | $ 420,000 | |
| Selling and administrative | 200,000 | (620,000) |
| Contribution margin | 680,000 | |
| Fixed Costs -selling and administrative | (285,000) | |
| Before-tax profit | 395,000 | |
| Income taxes (36%) | (142,200) | |
| After-tax profit | $ 252,800 |
a) Determine the annual break-even point in sales revenue.
Round contribution margin ratio to two decimal places for your calculation. Round final answer to nearest dollar.
(b) Determine the annual margin of safety in sales revenue.
Use rounded answer from above for calculation.
(c) What is the break-even point in sales revenue if management makes a decision that increases fixed costs by $57,000?
Use rounded contribution margin ratio (2 decimal places) for your calculation.
(d) With the current cost structure, including fixed costs of $285,000, what dollar sales revenue is required to provide an after-tax net income of $200,000?
Use rounded contribution margin (2 decimal places) for calculation. Round your answer to the nearest dollar.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 4 images
